ESCO Technologies Inc. (ESE) Business Profile

What it does

ESCO Technologies designs and manufactures engineered components, diagnostic equipment and testing systems for customers in aviation, defense, electric power and other industries. Bryan H. Sayler is its president and chief executive officer.

The Aerospace & Defense business makes parts that control or filter fluids in aircraft, as well as precision-machined components used in systems such as landing gear and flight controls. It also supplies naval products, including systems that help ships and submarines reduce the magnetic, electric, acoustic and vibration signatures that can make them detectable.

The Utility Solutions Group helps electric power operators assess the condition of equipment that generates and delivers electricity. Its offerings combine test instruments and monitoring systems with consulting, testing services and equipment-performance data. The group also makes tools used by wind and solar energy businesses.

The RF Test & Measurement business makes equipment and facilities that measure or control radio-frequency and electromagnetic energy. Customers use its products for activities such as testing wireless devices, meeting regulatory requirements and shielding sensitive rooms. Its offering ranges from individual filters and antennas to complete test facilities.

ESCO operates through subsidiaries that research, develop, manufacture, sell and support these products and systems. It employed 3,425 people at September 30, 2025.

How it makes money

ESCO earns revenue by selling components, instruments, systems and services through its three operating segments. Its subsidiaries also support products after sale, and its utility and test businesses provide services alongside their equipment. The company distributes products through direct sales teams and in-house personnel as well as distributors and sales representatives.

Continuing-operations net sales were $1,095.4 million in fiscal 2025; in the third quarter of fiscal 2026, reported sales growth was 14%.

Aerospace & Defense accounted for approximately 44% of total revenue from continuing operations in fiscal 2025. Its products range from aircraft filtration and fluid-control devices to naval signature-management and power systems. Government work includes both cost-plus contracts, which provide an amount or percentage above actual performance costs, and fixed-price contracts, which do not adjust payment for actual costs. Some long-term contracts also contain incentive fees tied to performance, milestones or cost targets.

Utility Solutions Group accounted for approximately 35% of continuing-operations revenue in fiscal 2025. Doble combines instruments and monitoring equipment with consulting and testing services. Morgan Schaffer supplies transformer oil testing, dissolved gas analysis and data management; NRG supplies decision-support tools for renewable energy. ESCO does not disclose a recurring-revenue share for these offerings in the available information.

RF Test & Measurement accounted for approximately 21% of continuing-operations revenue in fiscal 2025. It sells complete testing and shielding systems as well as components, software, calibration and product-testing services. Its customers use these products in research, compliance, medical, security and other applications.

Revenue on some contracts is recognized as work progresses. Aerospace & Defense generally measures progress using costs incurred against estimated total costs, while Test generally uses milestones achieved. Changes in estimated contract costs can affect reported profitability.

Customers and how it sells

ESCO sells to commercial aviation and defense customers, naval programs, electric utilities, industrial power users and renewable energy businesses. Its test and shielding customers span medical, electronics, wireless communications, automotive, defense and security applications. ESCO also supplies electromagnetic interference filters for commercial and government data centers.

Some defense products reach the U.S. Government directly through contracts with military services and other agencies; others are sold indirectly through prime contractors. Direct and indirect U.S. Government sales accounted for approximately 23% of total revenue from continuing operations in fiscal 2025, primarily in Aerospace & Defense. ESCO is under contract with prime contractors for content on Virginia-class and Columbia-class submarines.

The company uses distributors, sales representatives, direct sales teams and in-house sales personnel. International customers accounted for approximately 34% of continuing-operations revenue in fiscal 2025.

ESCO has facilities in the United States and abroad. Aerospace & Defense has operations in the United Kingdom and Mexico as well as the United States. Utility Solutions Group has facilities in Canada and outside North America, while Test has facilities outside the United States. Test also does significant business in Asia.

Suppliers and costs

ESCO buys a wide variety of components and raw materials. It has multiple sources for most requirements, but some materials and components come from sole-source vendors. Where feasible, it engineers and qualifies substitutes to address short-term supply problems.

Aerospace & Defense screens multiple raw-material vendors in many cases. It can still face shortages or price fluctuations, including for aerospace-grade titanium. Utility Solutions Group uses regional contract manufacturers under long-term contracts to make electronic instruments; some of its products require helium.

The Test segment makes most of its critical radio-frequency components itself. It also purchases materials including polyurethane foam, steel, aluminum, copper, nickel and wood, leaving it exposed to changes in global raw-material prices. ESCO has experienced increases in raw-material and transportation costs.

Selling, general and administrative expenses were $234.6 million in fiscal 2025. Acquisition-related amortization and acquisition costs also increased corporate costs that year, primarily because of the Maritime acquisition. ESCO conducts research and development both at its own expense and with customer funding.

Competitive position

ESCO competes globally in specialized markets where quality, technology, price and delivery performance are important. It has relatively small shares in many of the markets it serves, and its product-level competitive position cannot be precisely stated because of the specialized nature of the products.

In Aerospace & Defense, named competitors include Pall Corporation, Moog, Safran, TransDigm and Parker Hannifin. Utility Solutions Group competes with businesses including OMICRON, Megger, Vaisala and Qualitrol. In electromagnetic shielding, Test competitors include Rohde & Schwarz, Microwave Vision and TDK RF Solutions. ESCO is pursuing an acquisition of Megger; completion remained subject to the regulatory process as of its third quarter of fiscal 2026.

ESCO owns patents and other intellectual property across its segments. Aerospace examples include proprietary filter media and signature-reduction technology. Doble has patents and an extensive library of equipment-performance information, part of which is available to registered users. Test has patents and applications covering shielded-enclosure designs, antennas and wireless-device testing.

Our reading: Proprietary designs and specialized manufacturing capabilities can help distinguish ESCO’s products, although intellectual property protection has limits and competitors may design around it. Our reading: Doble’s equipment-performance library and combination of instruments, consulting and testing services can help support customer relationships, but the evidence does not establish how difficult customers find switching.

Growth opportunities

ESCO seeks to expand product offerings, improve operations and supplement growth through acquisitions. Continuing-operations net sales increased to $1,095.4 million in fiscal 2025 from $919.1 million in fiscal 2024. The increase included contributions from Maritime, which ESCO acquired in April 2025, as well as higher commercial aerospace and other segment sales.

Firm-order backlog was $1,133.6 million at September 30, 2025. Fiscal 2025 Aerospace & Defense orders included $364.2 million of Maritime acquired backlog. In the third quarter of fiscal 2026, total backlog reached $1.54 billion; ESCO said the prior-year comparison for orders was affected by the acquired Maritime backlog.

In aviation, ESCO estimates a global backlog of approximately 18,000 aircraft and additional unmet demand of 5,000 aircraft. It also has submarine content under contract with prime contractors. In utility solutions, ESCO points to rising power demand, electrification and grid modernization as drivers of demand for testing and maintenance tools.

In Test, ESCO said fiscal third-quarter orders increased by 42%, driven by industrial shielding projects and electromagnetic interference filters. The shielding orders primarily related to secure rooms in the United States and Europe.

ESCO expects its acquisition of Megger to close in the first quarter of fiscal 2027, subject to the regulatory process. The company has also introduced an operating system intended to improve processes and reduce costs across its businesses.

Structural risks

• Government programs: Government contracts may be terminated for the convenience of the government or customer. Changes in government priorities or budgets, including potential reductions in UK naval funding, can affect orders.

• Supply and costs: Some components and materials depend on sole or limited sources. Supplier delays can prevent timely delivery, while raw-material and transportation cost increases can adversely affect results and cash flow.

• International exposure: Tariffs, export controls, sanctions, sourcing restrictions, currency movements and political or economic changes can disrupt operations or demand. Test does significant business in Asia and faces risks related to the political climate in China and the surrounding region.

• Contract estimates: Long-term contract profitability depends on estimates of costs, labor productivity and engineering requirements. Changes in those estimates can affect earnings, and anticipated contract losses are recognized when they become known.

• Renewables demand: NRG experienced weak orders as renewables markets remained soft. ESCO also cited permitting issues and tariff-related costs affecting wind projects.

• Acquisitions and integration: ESCO may not be able to identify suitable acquisition candidates or complete acquisitions successfully. The planned Megger transaction remains subject to regulatory review, and the companies are still working on integration planning.

Bottom line

Our reading

ESCO combines specialized aerospace and naval components with utility diagnostics and electromagnetic testing and shielding. Its business rests on engineering, manufacturing and service capabilities across several customer markets, while government programs and long-term contracts carry their own delivery and cost-estimation risks. Acquisitions have added to the business and backlog, and the planned Megger transaction would expand utility solutions if completed.